8-K
GENERATION INCOME PROPERTIES, INC. (GIPR)
A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 15, 2024
GENERATION INCOME PROPERTIES, INC.
(Exact Name of Registrant as Specified in its Charter)
| Maryland | 001-40771 | 47-4427295 |
|---|---|---|
| (State or Other Jurisdiction of<br><br>Incorporation) | (Commission<br><br>File Number) | (IRS Employer<br><br>Identification No.) |
| 401 East Jackson Street, Suite 3300<br><br>Tampa, Florida | 33602 | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code: (813)-448-1234
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, par value $0.01 per share | GIPR | The Nasdaq Stock Market LLC |
| Warrants to purchase Common Stock | GIPRW | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On November 15, 2024, Generation Income Properties, Inc. (the “Company”) issued a press release reporting its financial results for the three and nine months ended September 30, 2024. A copy of the press release is furnished herewith as Exhibit 99.1 and is incorporated by reference herein.
Item 7.01. Regulation FD Disclosure.
The Company is also furnishing in this Current Report on Form 8-K a presentation (the “Investor Presentation”) to be used by the Company at various meetings with investors, analysts, or others from time to time. The Investor Presentation may be amended or updated at any time and from time to time through another Current Report on Form 8-K, a later company filing or other means. A copy of the Investor Presentation is furnished herewith as Exhibit 99.2 and is incorporated into this Item 7.01 by reference.
The information furnished in these Items 2.02 and 7.01, including Exhibit 99.1 and Exhibit 99.2, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to liabilities under that section, and shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filings.
| Item 9.01. | Financial Statements and Exhibits. |
|---|---|
| (d) | Exhibits. |
| --- | --- |
| Exhibit<br><br>No. | Description |
| --- | --- |
| 99.1 | Press Release dated November 15, 2024 |
| 99.2 | Investor Presentation Deck dated November 15, 2024 |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
Forward-Looking Statements
This Current Report on Form 8-K may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainty. Words such as “anticipate,” “estimate,” “expect,” “intend,” “plan,” and “project” and other similar words and expressions are intended to signify forward-looking statements. Forward-looking statements are not guarantees of future results and conditions but rather are subject to various risks and uncertainties. Such statements are based on management’s current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Investors are cautioned that there can be no assurance actual results or business conditions will not differ materially from those projected or suggested in such forward-looking statements as a result of various factors. Please refer to the risks detailed from time to time in the reports we file with the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on April 8, 2024, as well as other filings on Form 10-Q and periodic filings on Form 8-K, for additional factors that could cause actual results to differ materially from those stated or implied by such forward-looking statements. We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, unless required by law.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| GENERATION INCOME PROPERTIES, INC. | ||
|---|---|---|
| Date: November 15, 2024 | By: | /s/ Ron Cook |
| Ron Cook | ||
| Principal Finance and Accounting Officer |
EX-99.1
Exhibit 99.1
FOR IMMEDIATE RELEASE
November 15, 2024
Generation Income Properties Announces Third Quarter 2024 Financial and Operating Results
TAMPA, FLORIDA – Generation Income Properties, Inc. (NASDAQ: GIPR) ("GIPR" or the "Company") today announced its three and nine month financial and operating results for the period ended September 30, 2024.
Quarterly Highlights
(For the 3 months ended September 30, 2024)
- Generated net loss attributable to GIP common shareholders of $2.1 million, or ($0.55) per basic and diluted share.
- Generated Core FFO of ($146 thousand), or ($0.03) per basic and diluted share.
- Generated Core AFFO of $100 thousand, or $0.02 per basic and diluted share.
FFO and related measures are supplemental non-GAAP financial measures used in the real estate industry to measure and compare the operating performance of real estate companies. A complete reconciliation containing adjustments from GAAP net income to Core FFO and Core AFFO is included at the end of this release.
Portfolio
- Approximately 60% of our portfolio’s annualized base rent ("ABR") as of September 30, 2024 was derived from tenants that have (or whose parent company has) an investment grade credit rating from a recognized credit rating agency of “BBB-” or better. Our largest tenants are the General Service Administration, Dollar General, EXP Services, Kohl’s Corporation, PRA Holdings, and The City of San Antonio which collectively contributed approximately 69% of our portfolio’s annualized base rent.
- Our portfolio is 89% leased and occupied and tenants are 100% rent paying.
- Approximately 92% of the leases in our current portfolio (based on ABR as of September 30, 2024) provide for increases in contractual base rent during future years of the current term or during the lease extension periods.
- Average effective annual rental per square foot is $14.75.
Liquidity and Capital Resources
- $1.58 million in total cash and cash equivalents as of September 30, 2024.
- Total mortgage loans, net was $59.7 million as of June 30, 2024.
Financial Results
- During the three and nine months ended September 30, 2024, total revenue from operations were $2.4 million and $7.09 million respectively, as compared to $1.8 million and $4.5 million for the three and nine months ended September 30, 2023, respectively. The overall revenue increase was driven by the integration of the 13-property portfolio acquired from Modiv in August 2023.
- Operating expenses, including G&A, for the same periods in the current year were $3.8 million and $11.1 million, respectively, due to increases in depreciation and amortization and interest expense from recent acquisitions.
- Net operating income (“NOI”) for the three months ended September 30, 2024, was $1.7 million and $1.4 million for the same period last year, which is a direct result of the acquisition of properties.
- Net loss attributable to GIPR for the nine months ended September 30, 2024, was $8.3 million as compared to $4 million for the same period last year.
Commenting on the quarter, a letter from CEO David Sobelman:
To the Shareholders and my colleagues at Generation Income Properties, Inc.,
The third quarter of this year presented challenges for our stock price, which reached an all-time low despite the significant transitional events we’ve achieved to position the company for long-term growth and sustainability. I recognize that some shareholders have expressed concerns, indicating that the company's recent dividend suspension holds more weight for them than our long-term outlook. It’s clear that many of our shareholders view their investment primarily for the monthly dividend and the regular income it provides, rather than the intrinsic value of our growing assets. I understand this perspective, especially given that "income" is part of our company name. REITs are fundamentally structured to provide dividends, a practice established since their inception in the 1950s and 1960s, offering a transparent way for investors to engage in real estate markets that might otherwise be inaccessible.
I recently finished reading "Watch That Rat Hole: And Witness the REIT Revolution" by Kenneth D. Campbell, one of the early analysts in the REIT industry. The book discusses how REITs were created to fund single-family home developers, providing the necessary short-term debt for their projects in the post-WWII era. This initiative arose from a pressing need in the United States, as developers struggled to secure funding from traditional banks for their short-term projects. Over time, the REIT structure evolved to include funding not only for debt but also for a variety of property types.
This historical context highlights that, since the industry's inception, many investments have focused on short-term returns. Campbell’s book also notes that economic changes can impact these short-term strategies. When conditions shift—such as interest rate increases or changes in consumer behavior—companies may face significant adjustments, sometimes leading to drastic decisions like asset sales or restructuring.
At GIPR, we have always maintained a long-term, generational outlook to avoid succumbing to short-term market pressures. We believe that our approach has proven effective over the years in the industry generally, and we remain committed to making decisions that prioritize sustainable growth for the future.
I recognize that long-term thinking can be challenging for many investors, and I share a sense of impatience regarding various aspects of my life, including the growth of GIPR. However, it's important to reflect on our progress. Approximately this time last year, we were half our current size, and we’ve made substantial strides since then. I also understand that many of our shareholders may not thoroughly review our public filings, so I’d like to highlight some key events from the previous quarter:
- July 2, 2024- We successfully raised $2.5 million in new capital through preferred units from a new investor.
- July 3, 2024 - We made the difficult but strategic decision to suspend our dividend in order to focus on growth, with plans to prioritize reinstating the dividend when feasible.
- July 19, 2024 - Due to our ongoing growth and increased complexities, we engaged Cohn Reznick, a top 20 accounting firm, as our independent auditor.
- July 24, 2024 - We extended the redemption date for one of our unit holders from February 8, 2025, to February 8, 2027.
- August 23, 2024 - We acquired an investment-grade tenanted building (Best Buy, NYSE: BBY, S&P: BBB) at an effective cap rate of 8.1%, set to begin in January 2025.
- August 29, 2024 - We extended the maturity date of a loan set to expire in October 2024 to August 30, 2029, with no cash outlay required from the company.
Importantly, we accomplished all this while maintaining the integrity of our current portfolio, with 100% rent collection from our tenants.
I don’t intend to paint this as solely good news. You have the responsibility to assess your investment wisely, and we aim to provide you with transparent information to aid in that decision. This level of transparency is a distinct advantage over private companies, where reporting would be considerably less frequent or detailed. Your access to our updates allows you to make informed decisions based on clarity regarding our activities.
Why Temporarily Suspend the Dividend
Let me start with this; our company is stable, our balance sheet is strong, and our tenants are paying rent as planned. However, our priority is growth, and we constantly require new assets and new capital to achieve that. Without growth, our stock price may experience temporary pressure before it increases in value. Currently, raising public capital would be costly and could dilute existing shareholders, providing better deals to new investors than to current ones. By conserving our cash for new asset acquisitions and debt reduction, we aim to enhance the company’s long-term value.
Additionally, while I take the daily news with a grain of salt, it’s evident that the economy remains uncertain. Recent reports indicate that bankruptcies in 2024 are expected to surpass those in 2023. Therefore, we are adopting a conservative approach to cash management, ensuring we can sustain this unpredictable period while positioning the company for future growth without making decisions based solely on fleeting market sentiments.
It’s also important to recognize that the information you receive from us may not always convey the broader context. Sometimes, we report on specific events without detailing their potential impact on other initiatives. Due to stringent regulations, we strive to provide you with all the information necessary to evaluate your investment in our company and to answer any questions about our decisions.
Our choices are made with the long-term benefit of all shareholders in mind as we navigate this complex real estate market early in our public journey.
In the past, I’ve noted that analysts typically do not value companies based solely on dividends. Instead, they understand that dividends attract investor interest, which can drive stock prices.
Dividend = positive
No dividend = requires more analysis
While the formulaic approach is standard in securities analysis, ultimately, market sentiment dictates stock prices. Therefore, I cannot predict exactly when our stock price will recover, but it often happens when investors recognize the undervaluation and begin purchasing shares.
Regarding the reinstatement of the dividend, this is another item where I can’t give you the exact date that will occur. However, I can assure you that when we made the decision to suspend the dividend, we were already strategizing on how to reverse that decision for the benefit of all shareholders. This process has involved thorough discussions on why the suspension was necessary, what actions we would take during this period, and how we could eventually reinstate the dividend.
How Do We Grow GIPR
While it may seem there’s bad news this quarter due to our stock price decline, it’s essential to acknowledge our journey. As one of GIPR's top five shareholders, I, too, prefer to see positive returns on investment. Warren Buffett famously stated in a 2008 op-ed, "Bad news is an investor's best friend. It lets you buy a slice of America's future at a marked-down price." Over the past three years, shareholders have seen our portfolio grow from eight properties to twenty-seven. We’ve successfully utilized our shares and operating partnership equity as currency for acquisitions and secured financing when many lenders were hesitant. We started with zero properties, went through our IPO with eight properties and have successfully grown the portfolio to 27 properties with only one public capital raise.
We plan to leverage our resources to acquire properties with partners, as we have done in the past, and we will continue to accept assets through our UPREIT program, requiring minimal cash outlay. Our focus on these growth strategies not only benefits the company but also aligns us with investors who understand our long-term vision.
Subsequent Events and Values
GIPR has no debt obligations due until 2028 and no cash redemptions due until 2026. These changes have been carefully planned and executed in recent months. Our Director of Capital Markets, Emily Hewland, has proactively managed our timelines, ensuring we face no imminent deadlines that limit our options. We adhere to Charlie Munger's principle of "Inversion Thinking", identifying potential pitfalls and proactively preventing them.
GIPR’s culture and core values are fundamental to our identity, akin to long-standing companies like Apple and Patagonia. Based in Tampa, FL, we have recently faced significant challenges, including hurricanes that impacted our community.
While our team remained safe, many friends and family experienced devastating losses. Witnessing their struggles has been emotionally difficult. During this time, our Asset Manager, Bobby Rohrlack, led efforts to reach out to tenants who could help those affected in North Carolina and Florida. Leveraging our relationships with major corporations, we coordinated support for those in need.
The outcomes of Bobby's initiatives include:
Walgreens: We connected their VP of Public Affairs with the ASYMCA to coordinate donations of household items.
ASYMCA: We established communication with ASYMCA’s Executive Director in Fayetteville, NC, to address urgent supply needs.
Dollar General: Engaged with their VP of Real Estate to forward our outreach to their Community Giving Department.
Dollar Tree - Connected with their Corporate Marketing Director, who is coordinating internal relief efforts and financial grants for impacted areas.
PRA Group: Engaged their Facilities & Real Estate VP, who expressed interest in partnering with us.
Starbucks: Met with local management to explore potential community collaboration.
Conclusion
In delivering this message, my aim is to be honest and transparent while outlining our plans moving forward. I understand that the topics of stock price and dividends weigh heavily on your minds, as they do on mine.
We still have a considerable journey ahead before we can claim the stature of some of our larger peers. However, as we navigate the capital and real estate markets, we are committed to seizing growth opportunities. I believe that the current market could present a favorable buying opportunity for both our shares and the assets we pursue.
As we continue this journey, rest assured that our portfolio remains stable, our tenants are fulfilling their obligations, and our balance sheet is solid.
Sincerely,
David Sobelman
About Generation Income Properties
Generation Income Properties, Inc., located in Tampa, Florida, is an internally managed real estate investment trust formed to acquire and own, directly and jointly, real estate investments focused on retail, office, and industrial net lease properties in densely populated submarkets. Additional information about Generation Income Properties, Inc. can be found at the Company's corporate website: www.gipreit.com.
Forward-Looking Statements
This Current Report on Form 8-K may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainty. Words such as “anticipate,” “estimate,” “expect,” “intend,” “plan,” and “project” and other similar words and expressions are intended to signify forward-looking statements. Forward-looking statements are not guarantees of future results and conditions but rather are subject to various risks and uncertainties. Such statements are based on management’s current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Investors are cautioned that there can be no assurance actual results or business conditions will not differ materially from those projected or suggested in such forward-looking statements as a result of various factors. Please refer to the risks detailed from time to time in the reports we file with the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on April 8, 2024, as well as other filings on Form 10-Q and periodic filings on Form 8-K, for additional factors that could cause actual results to differ materially from those stated or implied by such forward-looking statements. We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, unless required by law.
Notice Regarding Non-GAAP Financial Measures
In addition to our reported results and net earnings per diluted share, which are financial measures presented in accordance with GAAP, this press release contains and may refer to certain non-GAAP financial measures, including Funds from Operations ("FFO"), Core Funds From Operations ("Core FFO"), Adjusted Funds from Operations (“AFFO”), Core Adjusted Funds from Operations ("Core AFFO"), and Net Operating Income (“NOI”). We believe the use of Core FFO, Core AFFO and NOI are useful to investors because they are widely accepted industry measures used by analysts and investors to compare the operating performance of REITs. FFO and related measures, including NOI, should not be considered alternatives to net income as a performance measure or to cash flows from operations, as reported on our statement of cash flows, or as a liquidity measure, and should be considered in addition to, and not in lieu of, GAAP financial measures. You should not consider our Core FFO, Core AFFO, or NOI as an alternative to net income or cash flows from operating activities determined in accordance with GAAP. Our reconciliation of non-GAAP measures to the most directly comparable GAAP financial measure and statements of why management believes these measures are useful to investors are included below.
Consolidated Balance Sheets
| As of December 31, | |||||
|---|---|---|---|---|---|
| 2023 | |||||
| Assets | |||||
| Investment in real estate | |||||
| Land | 23,268,037 | $ | 21,996,902 | ||
| Building and site improvements | 67,618,615 | 71,621,499 | |||
| Acquired tenant improvements | 2,380,920 | 2,072,205 | |||
| Acquired lease intangible assets | 10,501,756 | 10,571,331 | |||
| Less: accumulated depreciation and amortization | (11,070,036 | ) | (8,855,332 | ) | |
| Net real estate investments | 92,699,292 | 97,406,605 | |||
| Cash and cash equivalents | 1,547,110 | 3,117,446 | |||
| Restricted cash | 34,500 | 34,500 | |||
| Deferred rent asset | 435,767 | 1,106,191 | |||
| Prepaid expenses | 270,626 | 139,941 | |||
| Accounts receivable | 164,549 | 241,166 | |||
| Escrow deposits and other assets | 982,637 | 493,393 | |||
| Held for sale assets | 5,750,250 | - | |||
| Right of use asset, net | 6,088,025 | 6,152,174 | |||
| Total Assets | 107,972,756 | $ | 108,691,416 | ||
| Liabilities and Equity | |||||
| Liabilities | |||||
| Accounts payable | 79,297 | $ | 406,772 | ||
| Accrued expenses | 1,383,743 | 688,146 | |||
| Accrued expense - related party | 683,347 | 683,347 | |||
| Acquired lease intangible liabilities, net | 1,026,681 | 1,016,260 | |||
| Insurance payable | 150,450 | 34,966 | |||
| Deferred rent liability | 155,968 | 260,942 | |||
| Lease liability, net | 6,452,484 | 6,415,041 | |||
| Other payable - related party | 452,460 | 1,809,840 | |||
| Loan payable - related party | 5,500,000 | 5,500,000 | |||
| Mortgage loans, net of unamortized debt discount of 1,156,620 and 1,326,362 at September 30, 2024 and December 31, 2023, respectively, and debt issuance costs | 58,551,152 | 56,817,310 | |||
| Derivative liabilities | 809,339 | 537,424 | |||
| Total liabilities | 75,244,921 | 74,170,048 | |||
| Redeemable Non-Controlling Interests | 26,135,796 | 18,812,423 | |||
| Preferred Stock - Series A Redeemable Preferred stock, net, | |||||
| 0.01 par value, 2,400,000 shares authorized, no shares issued or outstanding as of September 30, 2024 and 2,400,000 shares issued and outstanding at December 31, 2023 with liquidation preferences of 5 per share | - | 11,637,616 | |||
| Stockholders' Equity | |||||
| Common stock, 0.01 par value, 100,000,000 shares authorized; 5,419,855 and 2,620,707 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively | 54,232 | 26,207 | |||
| Additional paid-in capital | 29,129,543 | 18,472,049 | |||
| Accumulated deficit | (22,984,596 | ) | (14,833,058 | ) | |
| Total Generation Income Properties, Inc. Stockholders' Equity | 6,199,179 | 3,665,198 | |||
| Non-Controlling Interest | 392,861 | 406,131 | |||
| Total equity | 6,592,040 | 4,071,329 | |||
| Total Liabilities and Equity | 107,972,756 | $ | 108,691,416 |
All values are in US Dollars.
Consolidated Statements of Operations
(unaudited)
| Three Months ended September 30, | Nine Months ended September 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | |||||||||
| Revenue | ||||||||||||
| Rental income | $ | 2,326,980 | $ | 1,841,044 | $ | 6,850,092 | $ | 4,486,501 | ||||
| Other income | 73,302 | 3,104 | 242,598 | 23,564 | ||||||||
| Total revenue | 2,400,282 | 1,844,148 | 7,092,690 | 4,510,065 | ||||||||
| Expenses | ||||||||||||
| General and administrative expense | 577,565 | 530,538 | 1,632,018 | 1,233,674 | ||||||||
| Building expenses | 729,062 | 431,359 | 2,067,356 | 1,065,214 | ||||||||
| Depreciation and amortization | 1,068,081 | 981,419 | 3,474,918 | 2,096,970 | ||||||||
| Interest expense, net | 1,098,608 | 770,624 | 3,142,489 | 1,706,585 | ||||||||
| Compensation costs | 296,399 | 346,196 | 816,605 | 980,202 | ||||||||
| Total expenses | 3,769,715 | 3,060,136 | 11,133,386 | 7,082,645 | ||||||||
| Operating loss | (1,369,433 | ) | (1,215,988 | ) | (4,040,696 | ) | (2,572,580 | ) | ||||
| Other expense | - | (639 | ) | - | (506,639 | ) | ||||||
| Gain on derivative valuation, net | (734,116 | ) | - | (308,570 | ) | - | ||||||
| Income on investment in tenancy-in-common | - | 3,362 | - | 32,773 | ||||||||
| Dead deal expense | - | - | (35,873 | ) | (109,569 | ) | ||||||
| Loss on held for sale valuation | - | - | (1,058,994 | ) | - | |||||||
| Net loss | (2,103,549 | ) | (1,213,265 | ) | (5,444,133 | ) | (3,156,015 | ) | ||||
| Less: Net income attributable to non-controlling interests | 866,047 | 425,637 | 2,612,405 | 681,916 | ||||||||
| Net loss attributable to Generation Income Properties, Inc. | (2,969,596 | ) | (1,638,902 | ) | (8,056,538 | ) | (3,837,931 | ) | ||||
| Less: Preferred stock dividends | - | 190,000 | 95,000 | 190,000 | ||||||||
| Net loss attributable to common shareholders | (2,969,596 | ) | (1,828,902 | ) | (8,151,538 | ) | (4,027,931 | ) | ||||
| Other comprehensive income: | ||||||||||||
| Gain on change in fair value of derivative instrument | - | 78,969 | - | 78,969 | ||||||||
| Comprehensive loss attributable to common shareholders | (2,969,596 | ) | (1,749,933 | ) | (8,151,538 | ) | (3,948,962 | ) | ||||
| Total Weighted Average Shares of Common Stock Outstanding – Basic & Diluted | 5,433,833 | 2,618,077 | 5,083,640 | 2,591,956 | ||||||||
| Basic & Diluted Loss Per Share Attributable to Common Stockholders | $ | (0.55 | ) | $ | (0.70 | ) | $ | (1.60 | ) | $ | (1.55 | ) |
Reconciliation of Non-GAAP Measures
(unaudited)
The following tables reconcile net income (loss), which we believe is the most comparable GAAP measure, to Net Operating Income (“NOI”):
| Three Months ended September 30, | Nine Months ended September 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | |||||||||
| Net loss attributable to common shareholders | $ | (2,969,596 | ) | $ | (1,828,902 | ) | $ | (8,151,538 | ) | $ | (4,027,931 | ) |
| Plus: Net income attributable to non-controlling interest | 866,047 | 425,637 | 2,612,405 | 681,916 | ||||||||
| Plus: Net income attributable to preferred | - | 190,000 | 95,000 | 190,000 | ||||||||
| Net income (loss) | (2,103,549 | ) | (1,213,265 | ) | (5,444,133 | ) | (3,156,015 | ) | ||||
| Plus: | ||||||||||||
| General and administrative expense | $ | 577,565 | $ | 530,538 | $ | 1,632,018 | $ | 1,233,674 | ||||
| Depreciation and amortization | 1,068,081 | 981,419 | 3,474,918 | 2,096,970 | ||||||||
| Interest expense, net | 1,098,608 | 770,624 | 3,142,489 | 1,706,585 | ||||||||
| Compensation costs | 296,399 | 346,196 | 816,605 | 980,202 | ||||||||
| Other expense | - | 639 | - | 506,639 | ||||||||
| Gain on derivative valuation, net | 734,116 | - | 308,570 | - | ||||||||
| Income on investment in tenancy-in-common | - | (3,362 | ) | - | (32,773 | ) | ||||||
| Dead deal expense | - | - | 35,873 | 109,569 | ||||||||
| Loss on debt extinguishment | - | - | 1,058,994 | - | ||||||||
| Net Operating Income | $ | 1,671,220 | $ | 1,412,789 | $ | 5,025,334 | $ | 3,444,851 |
FFO and Related Measures
(unaudited)
The following tables reconcile net income (loss), which we believe is the most comparable GAAP measure, to FFO, Core FFO, AFFO, and Core AFFO:
| Three Months ended September 30, | Nine Months ended September 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | |||||||||
| Net loss | $ | (2,103,549 | ) | $ | (1,213,265 | ) | $ | (5,444,133 | ) | $ | (3,156,015 | ) |
| Other expense | - | 639 | - | 506,639 | ||||||||
| Loss on derivative valuation, net | 734,116 | - | 308,570 | - | ||||||||
| Depreciation and amortization | 1,068,081 | 981,419 | 3,474,918 | 2,096,970 | ||||||||
| Loss on held for sale asset valuation | - | - | 1,058,994 | - | ||||||||
| Funds From Operations | (301,352 | ) | (231,207 | ) | (601,651 | ) | (552,406 | ) | ||||
| Amortization of debt issuance costs | 60,532 | 46,260 | 156,091 | 103,990 | ||||||||
| Non-cash stock compensation | 94,935 | 119,380 | 284,804 | 287,067 | ||||||||
| Adjustments to Funds From Operations | 155,467 | 165,640 | 440,895 | 391,057 | ||||||||
| Core Funds From Operations | $ | (145,885 | ) | $ | (65,567 | ) | $ | (160,756 | ) | $ | (161,349 | ) |
| Net loss | $ | (2,103,549 | ) | $ | (1,213,265 | ) | $ | (5,444,133 | ) | $ | (3,156,015 | ) |
| Other expense | - | 639 | - | 506,639 | ||||||||
| Loss on derivative valuation, net | 734,116 | - | 308,570 | - | ||||||||
| Depreciation and amortization | 1,068,081 | 981,419 | 3,474,918 | 2,096,970 | ||||||||
| Amortization of debt issuance costs | 60,532 | 46,260 | 156,091 | 103,990 | ||||||||
| Above and below-market lease amortization, net | 203,357 | 20,398 | 203,357 | (81,957 | ) | |||||||
| Straight line rent, net | 42,972 | 20,942 | 74,253 | 61,383 | ||||||||
| Adjustments to net loss | 2,109,058 | 1,069,658 | 4,217,189 | 2,687,025 | ||||||||
| Adjusted Funds From Operations | $ | 5,509 | $ | (143,607 | ) | $ | (1,226,944 | ) | $ | (468,990 | ) | |
| Dead deal expense | - | - | 35,873 | 109,569 | ||||||||
| Non-cash stock compensation | 94,935 | 119,380 | 284,804 | 287,067 | ||||||||
| Adjustments to Adjusted Funds From Operations | 94,935 | 119,380 | 320,677 | 396,636 | ||||||||
| Core Adjusted Funds From Operations | $ | 100,444 | $ | (24,227 | ) | $ | (906,267 | ) | $ | (72,354 | ) | |
| Net loss | $ | (2,103,549 | ) | $ | (1,213,265 | ) | $ | (5,444,133 | ) | $ | (3,156,015 | ) |
| Net income attributable to non-controlling interests | 866,047 | 425,637 | 2,612,405 | 681,916 | ||||||||
| Net loss attributable to Generation Income Properties, Inc. | (2,969,596 | ) | (1,638,902 | ) | (8,056,538 | ) | (3,837,931 | ) | ||||
| Less: Preferred stock dividends | - | 190,000 | 95,000 | 190,000 | ||||||||
| Net loss attributable to common shareholders | $ | (2,969,596 | ) | $ | (1,828,902 | ) | $ | (8,151,538 | ) | $ | (4,027,931 | ) |
| Total Weighted Average Shares of Common Stock Outstanding – Basic & Diluted | 5,433,833 | 2,618,077 | 5,083,640 | 2,591,956 |
The table above presents FFO in accordance with the most current available NAREIT guidance and in alignment with current industry standards. Presentations of FFO in our prior filings and announcements did not include Loss on held for sale asset valuation as an add-back in calculating FFO, but the data for three and nine months ended September 30, 2023 set forth above has been revised to include Loss on held for sale asset valuation as an add-back.
Our reported results are presented in accordance with GAAP. We also disclose funds from operations ("FFO"), adjusted funds from operations ("AFFO"), core funds from operations ("Core FFO") and core adjusted funds of operations ("Core AFFO") all of which are non-GAAP financial measures. We believe these non-GAAP financial measures are useful to investors because they are widely accepted industry measures used by analysts and investors to compare the operating performance of REITs.
FFO and related measures do not represent cash generated from operating activities and are not necessarily indicative of cash available to fund cash requirements; accordingly, they should not be considered alternatives to net income or loss as a performance measure or cash flows from operations as reported on our statement of cash flows as a liquidity measure and should be considered in addition to, and not in lieu of, GAAP financial measures.
We compute FFO in accordance with the definition adopted by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT"). NAREIT defines FFO as GAAP net income or loss adjusted to exclude extraordinary items (as defined by GAAP), net gains from sales of depreciable real estate assets, impairment write-downs associated with depreciable real estate assets, and real estate related depreciation and amortization, including the pro rata share of such adjustments of unconsolidated subsidiaries. We then adjust FFO for non-cash revenues and expenses such as amortization of deferred financing costs, above and below market lease intangible amortization, straight line rent adjustment where the Company is both the lessor and lessee, and non-cash stock compensation to calculate Core AFFO.
FFO is used by management, investors, and analysts to facilitate meaningful comparisons of operating performance between periods and among our peers primarily because it excludes the effect of real estate depreciation and amortization and net gains on sales, which are based on historical costs and implicitly assume that the value of real estate diminishes predictably over time, rather than fluctuating based on existing market conditions. We believe that AFFO is an additional useful supplemental measure for investors to consider because it will help them to better assess our operating performance without the distortions created by other non-cash revenues or expenses. FFO and AFFO may not be comparable to similarly titled measures employed by other companies. We believe that Core FFO and Core AFFO are useful measures for management and investors because they further remove the effect of non-cash expenses and certain other expenses that are not directly related to real estate operations. We use each as measures of our performance when we formulate corporate goals.
As FFO excludes depreciation and amortization, gains and losses from property dispositions that are available for distribution to stockholders and extraordinary items, it provides a performance measure that, when compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses and interest costs, providing a perspective not immediately apparent from net income or loss. However, FFO should not be viewed as an alternative measure of our operating performance since it does not reflect either depreciation and amortization costs or the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties which could be significant economic costs and could materially impact our results from operations. Additionally, FFO does not reflect distributions paid to redeemable non-controlling interests.
Investor Contacts
Investor Relations
ir@gipreit.com
NOVEMBER 2024 INVESTOR PRESENTATION
Forward-Looking Statements This presentation may contain forward-looking statements and information relating to, among other things, Generation Income Properties, Inc. (“the company”), its business plan and strategy, its properties and assets, and its industry. These forward-looking statements are based on the beliefs of, assumptions made by, and information currently available to the company’s management. When used in the offering materials, the words “estimate,” “project,” “believe,” “anticipate,” “intend,” “expect” and similar expressions are intended to identify forward-looking statements. These statements reflect management’s current views with respect to future events and are subject to risks and uncertainties that could cause the company’s actual results to differ materially from those contained in the forward- looking statements. Investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. The company does not undertake any obligation to revise or update these forward-looking statements to reflect events or circumstances after such date or to reflect the occurrence of unanticipated events. DISCLAIMER
GIPR Overview Recent Highlights 14 Tenant Market Caps 15 Investment Thesis CONTENTS Portfolio & Growth 16 Meet the Team 01 02 04 11 Values & Culture
1 NASDAQ listed since 2021: GIPR 2 $104M GAV 3 4 5 6 7 8 9 93% Occupancy 27 Properties 12 States 4.6yrs WALT 540K Square Feet 69% IGC Tenant ~5.5M Common Stock Outstanding GIPR OVERVIEW GIPR OVERVIEW 01 as of November 14, 2024
Redemption Extensions Preferred Investment $2.5M cash contribution into GIPLP in exchange for preferred partnership units Debt Extension Two Norfolk, VA loans extending to 2029, with no debt due until 2028 $5.5M Acquisition Acquired a Best Buy in Ames, IA for $5.5M (8.1% cap rate) with approximately ~45% LTV No required redemptions until 2026 RECENT HIGHLIGHTS ASYMCA Lease Signing 35,087 SF, 10-year lease term with credit-worthy, Department of Defense funded tenant Auburn University Lease Signing 27,000 SF, 3-year lease term with an AA- investment-grade rated (Moody’s) tenant Dollar Tree Lease Extension 5-year lease extension completed two years before current lease expiration Fresenius Lease Extension 7-year extension completed two years before current lease expiration extending the remaining term to 9 years 02 Click on Underlined Titles for SEC Filings 01 02 03 04 05 06 07 08
Conversations with GIPR Our podcast highlights entrepreneurial efforts and tells stories of interesting people in our community. Click here to listen to all epsisodes. Podcast Case Studies INVESTOR RELATIONS Click Boxes Above to Read Full Case Studies 03
INVESTMENT THESIS GIPR Unlocks Value & Growth in Stabilized Short Term Net Leased Assets 04
Targeted Acquisitions We purchase shorter-term net leased assets at higher cap rates, unlocking embedded value - our focus is on high quality RE, tenant credit, site-specific performance and geographic attributes INVESTMENT THESIS Proactive Asset Management We enhance property performance through strategic oversight and operational efficiencies Strong Tenant Relationships Creating relationships at the corporate & property level to improve the profitability of long-term, consistent occupancy Internal Growth Platform poised for advantageous internal growth through lease renewals, rental increases, re-tenancy, & asset appreciation 05
SHORT-TERM LEASE THESIS The Net Lease market remains fragmented with approximately 95% of buyers in the market being private individuals leading to market opportunity for institutional buyers and REITs. 01 02 03 04 The majority of both private and institutional buyers focus on assets with over 10 years remaining in lease term, leading to even less competition in the market for short term assets and a greater buying opportunity for GIPR. Due to the lack of demand for short term leases, there is a significant basis point spread on asking cap rates for the property type. Per Northmarq there is an approximate 75 basis point discount between net lease assets with 5 years or less remaining in lease term versus 10 years or more remaining. GIPR looks to take advantage of both market opportunity and basis point spread by acquiring shorter term leased assets at a discount and renewing and extending leases to lead to effectively 10 year plus lease terms. 06
CURRENT BUYING OPPORTUNITIES GIPR anticipates that market dynamics in 2025 and 2026 will create more favorable buying opportunities. The following data highlights three critical factors influencing the transaction market: transaction volume, trends in cap rates, and trends in interest rates. 01 02 03 04 Traditionally, transaction volumes have remained high, cap rates have stayed low, indicating that net lease properties have been trading at a premium, and interest rates have reached historic lows. However, due to Federal Reserve policies, interest rates rose sharply between 2022 and 2024, resulting in a slowdown in transaction volumes and a gradual increase in cap rates. The latest data suggests that the market is beginning to recalibrate toward a more favorable buying environment, with cap rates stabilizing at higher levels and interest rates decreasing. This shift may lead to a positive basis point spread between cap rates and the cost of capital, signaling promising investment opportunities ahead. See the graph on the following page for illustration. 07
CURRENT BUYING OPPORTUNITIES 2021 High transaction volume Low cap rates Low cost of capital 2022-2024 Decreasing transaction volume Slowly increasing cap rates Rapidly increasing cost of capital 2025 Low transaction volume Sustained high cap rates Decreasing cost of capital Patient and disciplined GIPR investing Buying opportunity for GIPR Greater buying opportunity for GIPR 08
Fresenius Medical Care Chicago, IL Acquisition Details: Purchase Price: $3,100,000 7.24% cap rate Extension Details: Seven-Year Extension New Value: The lease extension brought the total remaining lease term for this Fresenius property to nine (9) years. At the time of lease extension, a conservative cap rate compressions results in a 6.75% cap rate for the new property value NOI = $235,360 Cap Rate = 6.75% Property Value = $3,486,814 Acquisition Details: Purchase Price: $1,372,278 7.55% cap rate 2 Lease Years Remaining $103,607 NOI Extension Details: Five-Year Extension New Value: Lease extension brought the total remaining lease term for this Dollar Tree property to seven (7) years. At the time of lease extension, a conservative cap rate compressions results in a 6.5% cap rate for the new property value. NOI = $109,060 6.5% Cap Rate Property Value = $1,677,846 Dollar Tree Morrow, GA GIPR THESIS VALIDATED - EXAMPLES OF 2024 Acquisition Details: Purchase Price: $11,800,000 Annual Gross Rent: $1,237,111 Leased by two Investment Grade Credit Tenants: United States General Service Admin., & Maersk Line Limited New Tenant/ Lease Details: GIPR overcame MAERSK Line Limited vacating the property (approximately 35,000 SF) to re-lease the vacancy to the Armed Services YMCA, a Department of Defense Funded Tenant for a 10-Year Lease Term New Value Estimate: Annual Gross Rent = $1,348,217 Property Value = $12,800,000 Armed Services YMCA Norfolk, VA ~12.5% Increase in Value ~8.5% Increase in Value ~22% Increase in Value 09
...our relationship based, short-term lease thesis successfully drives value through early lease extensions and effective re-tenanting of vacant assets, contributing to sustained cash flow and enhanced property performance. IN SIMPLE TERMS... 10
Tenant City / State Bldg. Area (sf) Asset Class S&P Credit Rating Current Annual Rent Lease Expiration Date WALT Renewal Options 7-Eleven Corporation Washington, D.C. 3,000 R A $129,804.00 3/31/2026 1.44 2 x 5 years Auburn University Huntsville, AL 59,091 I AA- $283,500.00 7/31/2027 2.77 N/A Best Buy Co., Inc. Grand Junction, CO 30,701 R BBB+ $353,061.48 3/31/2027 2.44 1 x 5 years Best Buy Co., Inc. Ames, IA 30,465 R BBB+ $405,470.00 3/31/2030 5.44 2 x 5 years Dollar General Big Spring, TX 9,026 R BBB $86,040.96 6/30/2030 5.69 3 x 5 years Dollar General Castalia, OH 9,026 R BBB $79,319.64 5/31/2035 10.61 3 x 5 years Dollar General Lakeside, OH 9,026 R BBB $81,035.64 7/31/2035 10.78 3 x 5 years Dollar General Litchfield, ME 9,026 R BBB $92,961.00 9/30/2030 5.94 3 x 5 years Dollar General Mount Gilead, OH 9,026 R BBB $85,923.72 6/30/2030 5.69 3 x 5 years Dollar General Thompsontown, PA 9,100 R BBB $85,998.00 10/31/2030 6.02 3 x 5 years Dollar General Market Bakersfield, CA 18,827 R BBB $361,074.96 7/31/2028 3.77 3 x 5 years Dollar Tree Stores, Inc. Morrow, GA 10,906 R BBB $103,607.04 7/31/2030 5.77 2 x 5 years Fresenius Medical Care Holdings, Inc. Chicago, IL 10,947 R BBB- $233,479.80 10/31/2026 2.02 2 x 5 years General Services Administration Vacaville, CA 11,014 O AA+ $257,049.96 8/24/2026 1.84 N/A General Services Administration-FBI Manteo, NC 7,543 O AA+ $100,681.56 2/20/2029 4.33 1 x 5 years General Services Administration-Navy Norfolk, VA 49,902 O AA+ $640,741.68 9/16/2028 3.90 N/A Irby Construction Plant City, FL 7,826 O BBB- $176,674.32 12/31/2024 0.19 2 x 5 years Sherwin Williams Company Tampa, FL 3,500 R BBB $126,787.56 7/31/2028 3.77 5 X 5 years Starbucks Corporation Tampa, FL 2,200 R BBB+ $200,750.04 2/29/2028 3.35 4 x 5 years Starbucks Corporation Tampa, FL 2,642 R BBB+ $148,216.20 2/28/2027 2.35 2 x 5 years City of San Antonio (PreK) San Antonio, TX 50,000 R AAA $924,000.00 7/31/2029 4.77 1 x 8 years Dollar General East Wilton, ME 9,100 R BBB $112,439.28 7/31/2030 5.77 3 x 5 years La-Z-Boy Inc. Rockford, IL 15,288 R N/A $366,600.00 10/31/2027 3.02 4 x 5 years Armed Services YMCA of the U.S.A. Norfolk, VA 22,247 O N/A $274,379.64 4/30/2034 9.52 2 x 5 years exp U.S. Services Inc. Maitland, FL 33,118 O Not Rated $864,583.32 11/30/2026 2.10 1 x 5 years Kohl's Corporation Tucson, AZ 88,408 R BB $864,630.24 1/31/2030 5.28 7 x 5 years PRA Holdings, Inc. Norfolk, VA 34,847 O BB $788,090.28 8/31/2027 2.85 1 x 5 years Walgreens Santa Maria, CA 14,490 R BB $369,000.00 3/31/2032 7.44 N/A GIPR PORTFOLIO as of November 14, 2024 11
ABR Credit Rated $7,090,337 (82%) Investment Grade Credit $5,068,616 (59%) IGC Profile $640,980 (7%) Sub-Investment Grade Credit $2,021,721 (24%) Not Rated $864,583 (10%) GIPR PORTFOLI0 SUMMARIZATION 07 01 Property Types Collective Portfolio as of November 14, 2024 Retail Office Industrial 61% 36% 3% 12
LIQUIDITY STABLIZED DEBT CAPITAL RAISE ACQUISITIONS GIPR GROWTH Healthy cash balance on hand Stabilized long term debt with ability to advantageously refinance Capital raise Continuously looking at ways to raise additional accretive capital for growth Acquisitions Continue to grow the company GAV with assets with a 100-150bps spread over cost of capital Current Core Attributes 13
TENANT MARKET CAPS Market Capitalization (In Billions) GIPR is landlord to some of the United States’ largest institutions, including The United States Government ~$30T 06
Relational We prioritize and value our relationships, understanding that both professional and personal connections are our greatest assets. Generational Ethical Intelligent We make decisions with a long-term perspective, ensuring that our actions positively impact future generations. We uphold a culture of mutual accountability and self-driven integrity, where ethical behavior is both a personal commitment and a collective standard. Life-long learning, and application of that information, is a constant undertone that we emphasize every day. VALUES & CULTURE OF CARE We have a fiduciary responsibility to our shareholders, and we make that a high-ranking priority for ourselves. But our culture of “care” literally begins with the people that I work with each day. I start with them, to make sure they are empowered, feel safe to challenge themselves and each other as well as to make sure that they have a clear understanding that their entire well-being is of primary importance to me. They’re already smart, they’re already honest and they’re already motivated. It’s my job to let them know that their work is meaningful to me, to shareholders and to themselves. If they honestly know that, then I’m able to get out of the way and let them be who they already are in order to serve in the best way possible. David Sobelman, CEO 15
MEET THE TEAM Founder & CEO David Sobelman Mr. Sobelman serves as Chairman of GIPR’s Board of Directors, CEO, & President. He used the insight achieved through decades of focusing on net leased assets to imbed the philosophy of long-term, generational investing and founded Generation Income Properties (Nasdaq: GIPR) in 2015. He has led the efforts from GIPR’s conceptual genesis, to its current listing on Nasdaq and embeds the decades of meaningful relationships he has built within the industry in order to grow the company. VP Accounting & Finance Ron Cook With extensive experience in finance and accounting, Mr. Cook is a financial professional who serves as the Vice President of Accounting for Generation Income Properties leading the accounting functions at the firm. Mr. Cook has held executive and financial leadership roles over the past 10 years in consulting, family office and real estate private equity and is adept at strategic planning, financial reporting and modeling, data and market analysis, and forecasting. Dir. of Capital Markets Emily Hewland Ms. Hewland is Director of Capital Markets. Utilizing her experience as an analyst, she has built out GIPR’s acquisitions process to effectively underwrite assets thoroughly upfront to find value in the market for investors and the portfolio alike. Working closely with the CEO and CFO, Ms. Hewland plays a vital role in growing and overseeing acquisitions and capital markets to successfully execute on the acquisition pipeline. 16
MEET THE TEAM Corporate Controller Angel Gonzalez As Corporate Controller, Angel is responsible for the direct oversight of the accounting function, including financial reporting, treasury, tax and compliance. Prior to joining GIPR in 2024, Angel served in various accounting leadership roles with several real estate investment and capital advisory firms, investment managers, and operating companies. Angel has nearly 20 years of technical accounting and reporting experience in the public and private sectors. He is a licensed CPA. Acquisitions Manager Robert Rohrlack Mr. Rohrlack sources new acquisition opportunities that adhere to Generation Income Properties’ investment criteria, while maintaining an active role in negotiating transactions for new purchases. Prior to joining GIPR, Mr. Rohrlack was a Director at Savills Occupier Services, a global commercial real estate service provider, where he specialized in Tenant Representation. Dir. of Ops & Admin Emily Cusmano Ms. Cusmano has been involved with Generation Income Properties since its inception and has been working alongside David Sobelman for almost a decade in the net lease industry. She orchestrates the many key functions that keep GIPR running smoothly and takes care of in and out-of-house organization across all departments. Having been involved in real estate for over 15 years, she has become a mentor to the rest of the team on the administration of real estate transactions. 17
CONTACT: IR@GIPREIT.COM THANK YOU